Listed landlord Grainger Plc says the company is gearing up for a huge growth spurt on the back of a continued strong performance.
The Newcastle-based residential landlord and build-to-rent champion saw half-year rental income grow by 12% to top £48m in the six months ended March 31, while like-for-like rental growth was 6.8%. Occupancy rates also rose to 98.5% across its portfolio, triggering a 10% rise in dividends.
Half-year profits dropped from £31.6m to £25.2m but the firm said the performance was resilient, reflecting robust sales pricing, with the average sales price within -2.2% of vacant possession value, reflecting strong demand for properties.
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The company now has more than 10,000 homes on its books and a further 6,000 homes in its £1.6bn investment pipeline, and said it remain on track to deliver seven new schemes this calendar year, totalling 1,640 new energy-efficient, mid-market rental homes.
Chief executive Helen Gordon said: “We’re poised for a real growth spurt - we’ve got seven new schemes finishing in the second half of this year which are going to give a real step up in our net rental income, and that will translate to a step up in our dividend.
“We saw net rental income up 12% in the first half and when you think of all the economic turmoil we had between September 2022 and March 2023, I think we posted a really solid set of results. Our occupancy is very high and our customers are staying with us longer, which is one of our key measures.”
Before the year is out, new schemes will be up and running in key areas including Newbury, Derby, Nottingham and London, but it is proving slightly trickier to secure schemes closer to home in the North East. Yet Ms Gordon says Newcastle – where it has The Forge – remains an important centre, where quality homes for rental are deemed to be an important draw for young professionals.
She said: “We love Newcastle, and we’ve obviously got our Forge scheme in Newcastle, but we had to buy stabilised stock and it’s one of the few that Grainger hasn’t designed and built from scratch. The market there has been very strong so we got close on a number of schemes. Geography there is very tight and finding sites that we can develop, so it has been quite difficult for us to find land in Newcastle.
“We’ve got a big team in Newcastle. For us it makes natural sense to develop and it’s a strong city with good demand - it’s just a matter of finding an opportunity we can develop. Recent schemes have gone for housing for sale as opposed to build to rent.
“Demand for new rental homes is over 50% above the five year average, and supply is 33% below the five year average so you’ve got this huge supply and demand imbalance. I feel very strongly that having a good rental community is a really good thing for a city to have, and brings inward investment.
“When I’ve spoken at Newcastle leadership events and talked to other business leaders, they’ve spoken about how if we had more good quality rental homes we can attract more talent. Our core demographic is the 25 to 34 age group and they want to move around and don’t necessarily move to a city and want to buy a property immediately, they want to have a good rental experience. It’s definitely something that Newcastle needs to promote more.”
Looking ahead, Ms Gordon said there are strong opportunities for growth across the UK.
Ms Gordon added: “The opportunity in front of us is large. There are 5m households in the UK renting privately, representing 25% of all households. Yet only circa1.5% of these households live in purpose built, build-to-rent properties owned by large scale institutional landlords such as ourselves. The vast majority of the rental market is made up of small individual private landlords whose overall exit from the market is accelerating. This presents a significant opportunity for Grainger to increase market share.
“The investment case for the UK build-to-rent sector is underpinned by the severe housing shortage which characterises the UK housing market. Centre for Cities, a think tank, estimate that the UK requires 4.3m additional homes to plug the current gap, while official figures show supply of new homes continuing to reduce.”
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